As the energy transition gathers pace, there is an increasing need for energy talent. The global demand for oil and gas is projected to remain roughly stable, while indicators point to substantial growth in supply from new energy sources by 2035.1
The energy industry is therefore facing two significant and interacting areas of talent demand: securing talent to build and run fast-growing new energy businesses and maintaining core talent for traditional oil and gas production.

While demand for energy talent is growing, the energy sector is expecting to lose a substantial portion of its existing workforce; in the United States alone, as many as 400,000 employees in the sector are approaching retirement, expected to retire in the next 10 years.2
Given the oil and gas industry’s negative perception among younger workers, traditional energy businesses may find themselves at the short end of an upcoming talent squeeze.

Demand for talent from new energy businesses is likely to increase rapidly over the coming decade.3
The good news for renewable energy employers is that knowledge, expertise, and competencies gained in oil and gas are relatively easy to transfer to green energy businesses including carbon capture and storage (CCS), hydrogen, and wind.

CCS has the greatest transferability of both knowledge and experience, which is unsurprising given that many oil and gas companies have been capturing and storing carbon for some time. Hydrogen has fairly high transferability for most knowledge areas, though challenges remain regarding experience, especially in business development, commercial roles, and supply chain partnering. Offshore wind has the lowest relative transferability of these three, though it still offers ample opportunity for upstream employees to move into the new energy space.4

McKinsey’s Organization Data Platform analyzed publicly available data from LinkedIn to explore the talent circumstances of new energy businesses globally. They found that employees in the hydrogen space hold similar degree subjects to the degrees of those in traditional exploration and production (E&P) (Exhibit 1). This overlap underscores the high level of knowledge transferability between roles and indicates that there may be growing competition for talent between traditional and new energy businesses.

McKinsey also looked at the tenure of those in hydrogen-related roles and found that nearly four-fifths of employees have worked in the space for less than five years and only 10 percent of the total talent pool have more than ten years of hydrogen-related experience.5
This means that hydrogen businesses could struggle to find experienced people to fill positions and will need to establish programs to rapidly build expertise.

Meanwhile, demand for talent from traditional oil and gas companies is not going away. Globally, McKinsey expects to see broadly consistent demand for workers through to at least 2035.6
Meeting this demand could be challenging amid growing competition from new energy businesses, and workforce demographics that point to a looming talent crunch.

In the United States, over a quarter of employees are at or near retirement age, many of whom are frontline workers (Exhibit 2). In the United Kingdom, demographics are similar, with 43 percent of offshore workers currently over the age of 45.7

While this does not exactly represent a retirement cliff, it does emphasize the importance of maintaining a healthy recruitment pipeline into traditional oil and gas businesses over the coming decade. Energy companies will also need to reckon with—and develop plans to address—the impending loss of a valuable source of technical skills, industry knowledge, and institutional expertise. Thinking creatively about how to manage this aspect of the talent transition now could spur innovation, alternative work approaches, and an entry of fresh talent into the sector.8

Competition for employees is also heating up. Since 2016, out of all the employees who left their roles in energy and materials companies, 42 percent moved to a different industry.9
This underlines the very competitive nature of attracting and retaining talent within the sector.

Companies that lack a clear talent strategy could face a talent shortage in years to come. As one upstream executive put it, “The average age of our rig workers is 58 years old. We expect them to retire in ten years, but the life of our asset is 20 years. We currently don’t have a fact-based view on how big the problem is or how we are addressing it in the future.”

Hiring talent to backfill critical roles and fill new roles presents a unique set of obstacles in the energy sector. Experienced workers are retiring, mid-tenure employees have new opportunities in adjacent industries, and data indicates that fewer new employees are entering this workforce. The percentage of employees with less than two years of tenure dropped from 16 percent in 2012 to less than 4 percent in 2022.

Another challenge is that the oil and gas sector may not be perceived as attractive by potential employees. Research shows that a compelling employee value proposition (EVP) is strongly correlated with lower attrition rates and that this is an important and influential notion for younger generations (see Employee retention trends and challenges in the oil and gas industry).

To understand the impact of EVP in the traditional upstream sector, McKinsey examined employee satisfaction across industries on a range of dimensions. While oil and gas still scores above average for compensation, it is towards the bottom of the pack for career opportunities, corporate culture, and perceptions of senior management. In short, oil and gas companies tend to score lower on their EVP relative to other industries (Exhibit 3).

However, employees perceive oil and gas companies differently across regions, and EVP scores differ significantly (see sidebar, “Employee value proposition”). Oil and gas employee satisfaction is generally lower in developed markets, whereas jobs in oil and gas are still seen as one of the most desirable placements for top talent in many parts of the world. These regional differences may play an increasingly important role in talent decisions for global operators in the years ahead.

When rating their employers in terms of work–life balance, European employees reported the highest satisfaction (3.8 on a scale of one to five). On the other end, employees from Northern Africa, North America, the Middle East, and the Pacific Islands rated their work–life balance lowest, at 3.5 respectively. On average, Central Asian and Russian employees ranked their employers highest in terms of culture (4.1), career opportunities (3.8), and senior management (3.7), while North American employees expressed lower ratings across all categories except compensation, where Caribbean and Latin American employers ranked highest at 3.9.10

Executives in traditional oil and gas businesses may need to think about driving talent transformation to underpin long-term success.11
To do this, senior leaders could focus on the following five areas and address the associated underlying questions:

This is an unprecedented time for the energy industry as it transitions into the net-zero world. Like many other industries, the talent that oil and gas companies can attract, develop, and retain will shape the companies of tomorrow. The key question isn’t so much “How do I get enough talent to deliver on my plans?” but rather, “How can we confidently use this transition to our advantage?”